Pipeline deal to solidify energy giant as No. 1

On the Grid

From the shale fields to the cooling towers, Trib Total Media covers the energy industry in Western Pennsylvania and beyond. For the latest news and views on gas, coal, electricity and more, check out On the Grid today.

Daily Photo Galleries

Business Photo Galleries

Kinder Morgan Inc.'s agreement to buy El Paso Corp. for $21.1 billion, the energy industry's biggest transaction in more than a year, would create America's largest natural-gas pipeline network.

The combined company would have 67,000 miles of gas lines and eclipse Enterprise Products Partners LP as the nation's biggest pipeline operator.

The transaction strengthens Kinder Morgan's position as a major player in the U.S. gas industry, providing the infrastructure to transport growing production from new fields to new markets. Chief Executive Officer Richard Kinder is making a bet that the need for pipelines will continue to grow, said Bill Herbert, an analyst at Simmons & Co. International in Houston.

"Rich Kinder continues to make history by shaping and redefining the North American energy landscape," Herbert said. "And he is, once again, likely making the wise bet."

Pipeline grids are growing in Marcellus shale gas-producing regions of Western Pennsylvania and nearby states. More pipelines are needed to move gas to new markets, particularly for power generation, and to accommodate supplies from new gas fields such as the Marcellus Shale, said Dan Spears, a fund manager at Swank Capital LLC in Dallas.

EQT Corp. of Pittsburgh signed a deal with El Paso Corp. two years ago to develop the Northeast Passage line, originating in Monroe County, Ohio, and stretching 471 miles eastward through Greene, Fayette, Somerset and Bedford counties. An EQT spokeswoman did not respond to a request for comment.

"The merger makes a lot of sense, in that there are not a lot of duplicate assets" between the two companies, said energy expert Kent Moors at Duquesne University's Institute for Energy and the Environment.

El Paso mainly runs interstate pipelines, while Kinder Morgan has focused on gathering and storage lines, he said. The pipeline business is increasingly lucrative, due to the need to store gas from increased production.

"If you have to move your gas, you need to pay these guys. If it comes out of the ground and you need to store it, you pay these guys," Moors said. "Either way, they win."

"Major acquisitions like this underscore the critical and expanding role America's abundant natural gas reserves, particularly right here from the Marcellus and Utica shale formations, will continue to play in fueling our nation for decades to come," said Kathryn Klaber, president of the Marcellus Shale Coalition, based in Cecil. Utica shale underlies the Marcellus formation.

The El Paso acquisition will establish Kinder Morgan "as the pre-eminent pipeline company in the United States" and will provide operational savings and increased cash flows, said Gianna Bern, president of Brookshire Advisory & Research Inc. in Chicago.

Kinder Morgan said it will try to sell El Paso's exploration and production business. Evercore Partners Inc. and Barclays are advising Kinder Morgan on the effort, which may reap $6 billion or more, said a person with knowledge of the matter. El Paso announced in May that it would spin off the unit to its shareholders.

Kinder, 66, will be chairman and CEO of the combined company. The acquisition, once closed, would create immediate shareholder value because of its cash flow, he said.

TribLive commenting policy

You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments  either by the same reader or different readers.

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.

Print Source

Welcome to PrintSource, a division of Trib Total Media.

We have established a veteran team that provides daily and weekly newspaper companies with a comprehensive set of services that include design, print, packaging and delivery of their products, all from one source and location.

Gone are the days when each facet of newspaper printing and delivery had to be outsourced to different companies and venues. Now, PrintSource provides a viable solution with just one phone call.

Digital Sales

We offer a wide variety of traditional and new digital advertising options customized to fit your needs!

Whether you're just starting out, or you've been a keystone in the community for years, our knowledgeable staff can provide you with a customized package including online banners/advertisements, Social Media Marketing (Facebook / Twitter), Website development, Search Engine Optimization, Email Marketing solutions and much more!

Contact your local sales rep today for details, personalized proposal and a meeting to discuss how we can meet your needs.